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Monday, December 18, 2006

The Economic Psychology of marginal jobs

With the current re-run of the standard off-the-shelf popular uproar on ‘getting on yer bike’ to look for a job, a few thoughts on the psychology of market forces may be helpful.

"The next challenge we face is to ensure the hardcore of 'can work but won't work' benefit claimants take advantage of the opportunities out there and compete for jobs alongside growing numbers of migrants who arrive in Britain specifically to look for work rather than to settle for the long term."

And he goes on to suggest benefits cuts for people who do not follow up the kind of opportunities located by migrants.

Is this realistic? Well to tackle this theme I suggest we investigate whether there is a parallel with the conflicting psychological economics of public versus private transport.

People who buy their own cars invest a big sum in capital and yearly maintenance. Having made that investment, the extra (marginal) cost of any particular journey is just the fuel cost. People who rely on public transport do not have to make that up-front investment, but any particular journey has to meet not only the fuel costs but also a visible and immediate contribution to the fixed costs of the transport provider. Really, to make a comparison between these journey costs, the private driver should factor in a cost per mile payment to make a contribution to meeting already sunk cost. In a business they would. Few of us are so businesslike in our personal accounting.

Migrant workers looking for jobs in Britain are psychologically like car owners. They have already made a big up-front investment by moving to the UK and by accepting a pattern of living that maximises ability to shift around.

People already resident and established in the UK may have investments in living that do not allow for ‘cheap’ movement around. Like public transport users they see at the point of payment for an opportunity the full economic and social costs of being mobile in the search for marginally paying jobs.

Our Green Tax proposals are aimed (in part) in revealing the real costs of a private transport journey. So what about the real costs of work?

Genuine amateur economics student question: Anyone done research on the real fixed costs of taking a job? Unless we know something about this I suspect that being ‘tough on long-term unemployed’ will be less effective than the central stick wavers expect and we will still be stuck on the ‘benefits disincentive’ merry-go round.

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